Belief Formation: An Experiment With Outside Observers
AbstractIn this paper we investigate the necessary ingredients for an accurate model of belief formation. Using experimental data from a previous experiment, we bring in a new group of subjects whose job it is to predict the action choices of the subjects from the previous experiment. While the rules we consider are all, strictly speaking, adaptive (being based on past observables), some of the variables we uncover represent fairly sophisticated behaviour. Going from less to more sophisticated, we find that the following are important components of the belief formation process: the history of play, payoffs (whether real or ``imagined" in the sense of Camerer and Ho (1999)) of the player whose actions our subjects are predicting and the payoffs of the other player. The paper also documents the presence of subject-specific heterogeneity in both initial beliefs and, to varying degrees, almost all of the variables found to influence beliefs.
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Bibliographic InfoPaper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0802.
Date of creation: Apr 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Web page: http://www.smu.edu/economics
Game Theory; Belief Formation; Learning.;
Other versions of this item:
- Kyle Hyndman & Erkut Özbay & Andrew Schotter & Wolf Ehrblatt, 2012. "Belief formation: an experiment with outside observers," Experimental Economics, Springer, vol. 15(1), pages 176-203, March.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-CBE-2008-04-15 (Cognitive & Behavioural Economics)
- NEP-EVO-2008-04-15 (Evolutionary Economics)
- NEP-EXP-2008-04-15 (Experimental Economics)
- NEP-GTH-2008-04-15 (Game Theory)
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